Is Leasing Greener Than Selling?

Agrawal, Vishal; Ferguson, Mark; Toktay, L. Beril; Thomas, Valerie M.

doi:10.1287/mnsc.1110.1428

Cited by 349 publications

(173 citation statements)

References 18 publications

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“…We follow the convention in the literature (Agrawal et al 2012, Atasu and Souza 2011, White et al 1999, and assume that one unit of new product and remanufactured product entail E and e environmental impact, respectively, considering all stages of product life cycle, which includes production, use by customers, end of life, and remanufacturing. Therefore, when the OEM produces q n units and the IR remanufactures q r units, the total environmental impact is q n E þ q r e. The next proposition shows the effect of remanufacturing on the environment comparing it to the NR benchmark and describes how environmental impact depends on relative cost a and perception d of the remanufactured product.…”

Section: Environmental Impactmentioning

confidence: 99%

Competitive Quality Choice and Remanufacturing

Örsdemir

Kemahlıoğlu‐Ziya

Parlaktürk

2014

Production and Operations Management

359

201

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We consider an original equipment manufacturer (OEM) who faces competition from an independent remanufacturer (IR). The OEM decides the quality of the new product, which also determines the quality of the competing remanufactured product. The OEM and the IR then competitively determine their production quantities. We explicitly characterize how the OEM competes with the IR in equilibrium. Specifically, we show that the OEM relies more on quality as a strategic lever when it has a stronger competitive position (determined by the relative cost and value of new and remanufactured products), and in contrast it relies more heavily on limiting quantity of cores when it has a weaker competitive position. The IR's entry threat as well as its successful entry can decrease the consumer surplus. Furthermore, our results illustrate that ignoring the competition or the OEM's quality choice leads to overestimating benefits of remanufacturing for consumer and social welfare. In addition, we show an IR with either a sufficiently weak competitive position (so the OEM deters entry) or a sufficiently strong one (so the OEM is forced to limit quantity of cores) is desirable for reducing the environmental impact. Comparing our results with the benchmark in which the OEM remanufactures suggests that encouraging IRs to remanufacture in lieu of the OEMs may not benefit the environment. Furthermore, the benchmark illustrates that making remanufacturing more attractive improves the environmental impact when the remanufacturer is the OEM, while worsening it when remanufacturing is done by the IR.

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Section: Environmental Impactmentioning

confidence: 99%

Competitive Quality Choice and Remanufacturing

Örsdemir

Kemahlıoğlu‐Ziya

Parlaktürk

2014

Production and Operations Management

359

201

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“…Lobel and Perakis (2013) develop a model for the adoption of solar photovoltaic technology by residential consumers. Akin to the battery contract in this paper, Agrawal et al (2012) study the environmental impact of pay-per-use contracts (leasing) versus outright purchases in the context of durable products. Taking a life-cycle environmental impact perspective, they identify conditions such that leasing is a superior strategy for the provider firm.…”

Section: Literature Reviewmentioning

confidence: 99%

Electric Vehicles with a Battery Switching Station: Adoption and Environmental Impact

2015

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T he transportation sector's carbon footprint and dependence on oil are of deep concern to policy makers in many countries. Use of all-electric drive trains is arguably the most realistic medium-term solution to address these concerns. However, motorist anxiety induced by an electric vehicle's limited range and high battery cost have constrained consumer adoption. A novel switching-station-based solution is touted as a promising remedy. Vehicles use standardized batteries that, when depleted, can be switched for fully charged batteries at switching stations, and motorists only pay for battery use. We build a model that highlights the key mechanisms driving adoption and use of electric vehicles in this new switching-station-based electric vehicle system and contrast it with conventional electric vehicles. Our model employs results from repairable item inventory theory to capture switching-station operation; we embed this model in a behavioral model of motorist use and adoption. Switching-station systems effectively transfer range risk from motorists to the station operator, who, through statistical economies of scale, can better manage it. We find that this transfer of risk can lead to higher electric vehicle adoption than in a conventional system, but it also encourages more driving than a conventional system does. We calibrate our models with motorist behavior data, electric vehicle technology data, operation costs, and emissions data to estimate the relative effectiveness of the two systems under the status quo and other plausible future scenarios. We find that the system that is more effective at reducing emissions is often less effective at reducing oil dependence, and the misalignment between the two objectives is most severe when the energy mix is coal heavy and has advanced battery technology. Increases in gasoline prices (by imposition of taxes, for instance) are much more effective in reducing carbon emissions, whereas battery-price-reducing policy interventions are more effective for reducing oil dependence. Taken together, our results help a policy maker identify the superior system for achieving the desired objectives. They also highlight that policy makers should not conflate the dual objectives of oil dependence and emissions reductions as the preferred system, and the policy interventions that further that system may be different for the two objectives.

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“…(Environmental impact has been explicitly considered in the following papers: Agrawal et al (2012), Quariguasi-Frota-Neto and Bloemhof (2012), Wang et al (2017)). We assume that remanufacturing provides the lowest total E/S impact among all the market segments, due to its reuse of the materials and its high quality standards.…”

Section: Environmental and Social Impactmentioning

confidence: 99%

On the Competition between Two Modes of Product Recovery: Remanufacturing and Refurbishing

Chen

2019

Production and Operations Management

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The markets for recovered products in China typically consist of both remanufactured and refurbished products. The government requires that the remanufactured product match the quality level of the new product, while no such requirements exist for the refurbished product. Furthermore, remanufacturing is a relatively new phenomenon in China, whereas the refurbishing industry is old, widespread, and largely unregulated. Compared to the new product, the two types of recovered products enjoy a cost advantage, but they suffer from a lower willingness‐to‐pay in the consumer market. These observations lead to a game‐theoretic model consisting of three players: an original equipment manufacturer (OEM) providing the new product, a remanufacturing firm, and a refurbishing firm. The goal is to understand what equilibrium market structure may arise and how the equilibrium outcome depends on some of the key model parameters. It is found that (1) the entry barrier for the remanufacturer is always higher than that for the refurbisher; (2) remanufacturing almost always reduces the environmental and social (E/S) impact of the secondary market (for spare parts), such as the consumption of raw materials and energy during parts production, emissions and safety concerns during product use, and the E/S impact incurred during product disposal; and (3) the OEM has a natural tendency to discourage any form of product recovery by a third party, refurbishing or remanufacturing. These findings have potential policy implications for the government’s effort in cultivating the remanufacturing industry.

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Is Leasing Greener Than Selling?

Cited by 349 publications

References 18 publications

Competitive Quality Choice and Remanufacturing

Competitive Quality Choice and Remanufacturing

Electric Vehicles with a Battery Switching Station: Adoption and Environmental Impact

On the Competition between Two Modes of Product Recovery: Remanufacturing and Refurbishing

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